Aruba has established a modern legal system, which facilitates the financing and ensures the safety of aircraft and aircraft engines that are operated internationally.

By: Lincoln D. Gomez*[i]

In general, aircraft are registered as to nationality in the state in which the operating airline company is situated. Nonetheless, for a variety of reasons aircraft may be registered in another jurisdiction. For example, the acquisition and use of high value aircraft and aircraft engines requires a stable and clear source of aviation financing law. In some jurisdictions, however, no special aviation finance law is existent at all. Alternatively, this kind of law is terribly outdated. It is well established that legal uncertainty leads to economic unpredictability, which, in turn, leads to unnecessary high financing costs.

For that reason, the carriers, their lessors and financiers may prefer to register the aircraft in Aruba. This jurisdiction provides for a modern stable source of aviation finance law, a well-functioning system in which the proprietary interests in aircraft can be recorded and a modern public registry in which the aircraft can be registered as to nationality.

In addition, the government of Aruba has created a domestic agency which supervises the aviation safety requirements that must be met at the global level. For that purpose, this official body maintains a system registering the aircraft that are operated to or from this state.

Accordingly, Aruba has established a modern legal system, which facilitates the financing and ensures the safety of aircraft and aircraft engines that are operated internationally.

The Registration of aircraft in Aruba as to nationality
The Aruba Aircraft Registry (“AAR”) welcomes the registration of aircraft which are permanently operated in other jurisdictions. The registration procedure, which is purely administrative in nature, provides the aircraft with Aruba nationality. The nationality registry is supervised by the Aruba Directorate of Aviation. Currently, more than seventy aircraft are registered. These aircraft are operated by numerous carriers, which are situated in differing jurisdictions. Moreover, the AAR has certified forty two maintenance organizations that are located in various states.

Important reasons for registering aircraft in Aruba:

• Aruba has an open registration system. At present, it is not required by law that the airline company that operates the aircraft is an Aruba national. The aircraft may be used inside or outside Aruba.

• Easy de-registration of the aircraft. In Aruba, the de-registration of an aircraft can be realized easily by its owner. It may take 24 to 48 hours to realize it. De-registration is effectuated by means of a simple process obtaining the consent of the Court of First Instance of Aruba. For this purpose, the owner/lessor must provide the court with a copy of the registration. After the court has provided the owner/lessor with such a decision, the Aruba Directorate of Aviation will de-register the aircraft.

• Legal certainty with regard to aviation financing techniques. Aruba provides for the Aruba Aircraft Title Record (“AATR”), a public register, in which all proprietary rights in registered aircraft may be recorded. These interests include the transfer of ownership and other interests of a proprietary nature that can be vested in aircraft. This record is maintained by the (semi)governmental institution that registers mortgages in immovables, aircraft and vessels. The recording of these rights provides their holders with secured rights. After the rights have been recorded, the holders obtain real rights, as opposed to personal rights. To a very large extent, the recorded interests can be upheld against third parties inside and outside the bankruptcy of the debtor.

• Favourable tax treatment. To facilitate the financing and use of aircraft, an Aruba Exempt Company (AEC) may be constituted. Depending on its special purpose, an AEC may have a tax exempt status. Since January 2006 the tax rules in Aruba have changed. This change has had an effect on operational leases, but it did not have an influence on financial leases. For additional information on this subject, please consult the website of Gomez & Bikker www.gobiklaw.com, which particularly addresses the amendments of the Aruba Exempt Company law.

• Modern national and international aviation laws are applicable. Seen from a national legal perspective, Aruba provides for modern aviation finance laws. Aruba is an autonomous constituent jurisdiction of the Kingdom of the Netherlands. While the parts of the Kingdom have their own aviation financing laws, since 2002 the regimes of these jurisdictions are to a large extent uniform.

 Seen from an international legal perspective, the registration of an aircraft in Aruba includes the following advantages.

• The Kingdom of the Netherlands has ratified several international conventions, which are also valid in Aruba.
• The ICAO “Convention on the international recognition of rights in aircraft” Geneva Convention, 1948) is almost entirely incorporated into the Aruba Civil Code.
• Convention on the Unification of Certain Rules relating to the Precautionary Arrest of Aircraft (Rome Convention, 1933) has been accepted.
• The “Convention on International Civil Aviation” (Chicago Convention, 1944) has been accepted.
• It is the prevailing opinion in Aruba that the Kingdom of the Netherlands must ratify the Convention on International Interests in Mobile Equipment and Aircraft Equipment Protocol (Cape Town, 2001). The instruments would facilitate the financing of aircraft and aircraft engines.
• Aircraft engines can be leased and financed separately from aircraft frames in Aruba. In 2003 the Court of First Instance of Aruba  ruled that engines are not considered to be parts of the (small) not-registered aircraft (frame) to which they are attached, and they can be the objects of separate security interests. Gomez & Bikker represented the owner of the aircraft engines in this particular case. The team of this law firm is proud and honoured that its legal assistance lead to a breakthrough in this complex area of aviation financing law. In addition, a Court of Appeal in the Netherlands (European part of the Kingdom) ruled in the same direction as the Aruba court. The Dutch court decided that the aircraft engines that are attached to the aircraft frames of (large) registered aircraft do not become parts of this aircraft.
• The U.S. Federal Aviation Administration (“FAA”) and ICAO have rated Aruba as a Category 1 jurisdiction.
• Aruba follows the European Aviation Safety Agency standards.
• The Aruba Directorate of Aviation has knowledge of the U.S. FAR’s.
• The Aruba Directorate of Aviation complies with the aircraft certification of the major aircraft and aircraft engines manufacturers.

 Conclusion

The registration of aircraft in Aruba has significant advantages for the carriers and their financiers and lessors. The legal system of Aruba provides them, among other things, with a modern and solid aviation financing regime. In addition Aruba maintains a registration system which supervises that the international aviation safety requirements are met.